September 16, 2014 / 10:26 AM / 5 years ago

UPDATE 2-Blackstone seeks to raise $16 bln for its latest fund -source

(Updates sourcing, adds background)

By Greg Roumeliotis

Sept 16 (Reuters) - Blackstone Group LP aims to raise about $16 billion for its latest flagship buyout fund, roughly in line with a predecessor fund that wrapped up fundraising in 2012, a person familiar with the matter said on Tuesday.

Blackstone, the world’s largest alternative asset manager which had $68.3 billion in private equity assets at the end of June, is preparing to launch the new private equity fund after returning mountains of cash to its fund investors.

Taking advantage of red-hot equity and debt markets, Blackstone generated $14.8 billion in proceeds in the 12 months through June by selling private equity assets.

The Wall Street Journal earlier reported on the fundraising target. Blackstone declined to comment, and the source asked not to be identified because the fundraising process was confidential.

The latest fund, Blackstone Capital Partners VII, would be the largest private equity fund to hit the market since Apollo Global Management LLC’s $18.4 billion flagship private equity fund, which completed fundraising in January.

Blackstone’s previous buyout fund, Blackstone Capital Partners VI, raised $15.2 billion and reported a net internal rate of return (IRR) of 19 percent at the end of June. It began investing in August 2011.

The $21.7 billion Blackstone Capital Partners V fund, whose investment period ended in January 2011, reported a net IRR of 8 percent as of the end of June.

Blackstone Capital Partners VI attracted some of the world’s largest private-equity investors, including the California Public Employees’ Retirement System and the Canada Pension Plan Investment Board, according to disclosures by the pension funds.

Unlike some of its peers that launched funds with a specific geographic mandate, Blackstone’s private equity funds are global in scope. As a result, according to Blackstone, it can be more flexible and not be pressured to invest in any specific region.

A rally in equity values has raised concerns among investors that private equity firms may overpay for companies. Blackstone had $17.7 billion in available capital to invest in private equity as of the end of June.

“We can be both a profitable seller and a discriminating buyer at record levels at the same time,” Blackstone Chief Financial Officer Laurence Tosi told analysts and investors on the company’s last earnings call in July.

One of Blackstone’s biggest success stories has been hotel company Hilton Worldwide Holdings Inc, which went public last year. Blackstone said in July that Hilton’s share price at the time equated to a multiple of 2.8 times its original investment, which came from its private equity and real estate divisions. That implied a total gain of almost $12 billion, making it the largest private equity gain in history.

Blackstone has also said it expects to raise more than $4 billion for its second energy-focused private equity fund this fall. (Additional reporting by Shivam Srivastava in Bangalore; Editing by Gopakumar Warrier and Jeffrey Benkoe)

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